Telenor increases stake in Vimpelcom

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Norwegian telecommunications firm Telenor increased its stake last week in Russian mobile service provider VimpelCom ( VIP , quote ) from 31.7% to 35.7%.

Image courtesy David Hall: http://www.flickr.com/people/moonhouse/ Telenor is looking to take advantage of a depressed share price and to increase its exposure to the profitable and fast fast-growing Russian mobile market.

VIP's share price has come under pressure of late as the result of a drawn-out negotiation process over its merger with Egyptian Orascom Telecom and the Algerian government.

Orascom's Algerian subsidiary Djezzy owed the Algerian government significant back taxes; as a result, the Algerian government is demanding a controlling stake in Djezzy and threatening to levy a $1.25 billion fine on VIP in order to obtain its money. VIP is threatening to contest the fee in both Algerian and international courts.

Fears that talks between the two parties will dissolve have pushed VIP's stock lower. However, these concerns may be premature as Algerian officials claimed Monday that negotiations between Algeria and VIP are still ongoing.

While uncertainty over VIP's North African ventures may pressure the stock in the short-term, investors with a longer time horizon could follow Telenor's lead and take advantage of the attractive entry point.

Like other emerging market telecom firms, VIP will continue to benefit from the increased penetration of smart devices and a concomitant rise in lucrative mobile data revenue. Given the positive macro trends in the sector, combined with a projected annual growth rate of 26% and a strong free cash flow position, VIP could be a good buy at these levels.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , International , Stocks

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